Nov. 13 (Bloomberg) -- Lin Zuluan, head of the council in
the village of Wukan, has the same dinner interruption almost
every evening. Unhappy residents come with complaints, almost
always bringing up one topic: getting back their land.

A year ago, the villagers of Wukan, in southern China, were
hopeful after they grabbed world attention when they took to the
streets accusing local leaders of selling their land to
developers. They forced the politicians out of office and won
the right to elect their own representatives. Democracy hasn’t
helped them retrieve their land, said Lin, who was chosen for
the council after the protests.

“I thought as long as we followed the law and legal
procedures, we could solve it,” said Lin, 68, speaking from his
office, which has a tea set for visitors, in the three-story
beige council headquarters in the fishing village. “It turned
out to be more difficult than I imagined.”

Grievances like those in Wukan, which have sparked
thousands of protests across China, pose one of the most serious
challenges to the Communist Party as Vice President Xi Jinping
prepares to assume its leadership this week. While land grabs
that squeeze farmers off their plots are the biggest cause of
social unrest, a push to overhaul existing property laws faces
opposition from developers, businesses and local governments
that depend on land sales for revenue.

Take Less

Outgoing General Secretary Hu Jintao, forecast to remain as
China’s president until Xi takes that job in March, showed last
week that China’s leaders recognize the need for change. In a
Nov. 8 speech opening the 18th Communist Party Congress, he said
his successors must reform the “land expropriation system” and
“give more to farmers and take less from them.”

Xiaohui Wu, a land-tenure specialist at Landesa, a Seattle-based group that studies global land issues, said his
organization has had “regular contacts” with Chinese
government officials on legal changes that would make it harder
for farmers to be kicked off their land and increase levels of
compensation if they are. The proposed laws, which may be
considered by China’s legislature in March, would also give
farmers more say in the land-appropriation process, he said.

“China’s fast, low-cost industrialization and urbanization
were made possible partly because farmers were forced to make
huge sacrifices by getting only a small fraction of the true
market value of their land taken by the government,” Wu, who is
based in Beijing, said in an e-mail. “This development model
can’t be sustained any longer.”

Land Appropriations

About 43 percent of villages in China have experienced land
appropriations since the 1990s and land disputes are the leading
cause of social unrest in the country, Wu said. The number of
so-called mass incidents -- protests, riots, strikes and other
disturbances -- doubled in five years to almost 500 a day in
2010, according to Sun Liping, a sociology professor at
Beijing’s Tsinghua University.

China’s rapid growth, which has averaged 10.6 percent in
the past decade, has been built in part on land sales like those
in Wukan. City governments have relied on real-estate
transactions for much of their revenue because they have few
other sources of income, such as property taxes.

China’s government is studying an expansion of an
experimental property tax system, the official Xinhua News
Agency reported today, citing Minister of Housing and Urban-Rural Development Jiang Weixin.

Land is often taken from farmers, who receive meager
compensation, and then sold by local governments to property
developers for much more, said Wu. Local governments have been
able to take advantage of real estate prices that rose 160
percent in the 1998-2011 period.

Farmland Taken

Council member Lin said as many as 1,100 acres of farmland
were taken in recent years, as well as more for which villagers
have no measurement.

The Wukan protests erupted in September last year over
concerns that local officials were expropriating land from
farmers and selling it off. They intensified after a local
butcher involved in the demonstrations, Xue Jinbo, was arrested
and died in police custody on Dec. 11.

“My dad’s biggest wish was to get back the land Wukan
illegally lost,” Xue’s 23-year-old daughter, Xue Jianwan, said
in an interview in Wukan. “My father made a speech at a village
rally, telling residents not to be afraid. He said, ‘We will
stick together, if someone gets beaten, let me take the first
beating. If someone has to die, let it first be me.’”

Police Blockade

Having failed to quell the uprising, even after a two-week
blockade of the town by paramilitary forces, officials in
Guangdong province halted development on the some of the
appropriated land and promised elections in the village. State
media said the existing leadership had erred and praised
provincial governor and Politburo member Wang Yang for his
handling of the dispute.

“One year after disgruntled residents in south China’s
Wukan village staged a mass rally, progress has been evident in
the village’s self-governance,” Xinhua said in a commentary on
Sept. 21.

The new council now publishes its finances on posters hung
around the village, including council members’ salaries of as
much as 1,800 yuan ($243) a month. The council holds open town
meetings and construction has begun on a pipe that will bring
running water to Wukan.

“The old village committee ruled us with fear and
threats,” said Zhang Bingcai, a seafood trader. “Not this
one.”

Wukan’s Lessons

Wang Yang pledged at the national legislature in March to
highlight the lessons of the Wukan case at a conference this
year. Eight months later, no such event has been publicized.
While Wang was considered a candidate to join the Politburo
Standing Committee at the party congress by analysts surveyed by
Bloomberg News in September, he is no longer a frontrunner, said
Jean-Pierre Cabestan, head of the department of government and
international studies at Hong Kong Baptist University.

Still, land is the main concern for Wukan residents. About
626 acres of farmland have been returned, although that’s a
fraction of what was taken, said Zhuang Liehong, 28, a council
member who says he has tried to resign three times for failing
to get the land back, only to be rebuffed by the council head.

Much of the land has already been sold off to developers,
he said. A factory for producing air conditioners has been built
on one piece of land.

The media department at the Guangdong province headquarters
didn’t answer a faxed request for comment. Two phone calls and
an e-mail to the government in Shanwei, the city that holds
jurisdiction over Wukan, also went unanswered.

‘Already Gone’

“Once the land is taken it’s already gone to somebody,”
said Andy Xie, formerly chief Asia economist at Morgan Stanley.
“It’s very unlikely these things could be unwound unless
somebody goes to jail.”

Compounding the situation, local governments use land as
collateral for loans to fund their operations. Almost a quarter
of local governments’ 10.7 trillion yuan in debt by the end of
2010 was backed by land, according to China’s National Audit
Office.

Officials in the nearby town of Lufeng, who oversee Wukan’s
village council, have profited from the sales and are blocking
the return of the land, Zhuang and other Wukan residents say.

“If the land issues are not solved this time, Wukan
residents are likely to give up on democracy, and lose faith in
elections,” said Zhuang. “Who knows, they may take matters
into their own hands and even protest again.”